Julian Knight: The ghost of 2008 just won't be laid to rest – so here's what you can do

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The Independent Online

Those who didn't have their heads in their hands were working their BlackBerry keypads overtime.

"Do they know what they are doing – how serious the situation is? They are putting our whole way of life at risk," said one of the bankers sitting around the dinner table. The news had just come through that the US Congress had failed to agree a key financial deal and that the markets would open in the Far East in a few hours to utter chaos.

This wasn't last week but nearly three years ago in the aftermath of the Lehman collapse. On that evening a bailout fund for the banking system had just been voted down by the Republicans and I was thinking of queues outside the High Street banks in a few days and panic buying in the shops to follow. It really was such a close-run thing.

Now, more than 1,000 days on, I was again in the company of more finance industry types as the US Congress failed once more to come to terms, this time over raising the US debt ceiling. More shaking of heads and tutting followed, but a little less panic: the overwhelming view was that they'd sort it out in the end.

Having stared into the abyss in 2008, no one wants to revisit the experience. But will they sort it now, and did they really sort it out in 2008?

All that happened in 2008 was that an unsustainable debt bubble in the private sector was augmented with an even bigger debt bubble in the public one. In retrospect, it was all a little like a debtor paying off the bailiffs at the door with borrowed money.

Too little has been done to tackle the really big issues. Take reform of the banking sector meant to ensure that a similar crisis wouldn't re-occur. There has been little joined-up thinking, with individual jurisdictions pursuing their own paths. It's all got mightily confusing. That's what the banking industry wanted – to choke off any real impetus for far-reaching reform.

The Banking Commission in the UK has gone about its work in a sound way, but the Business Secretary, Vince Cable, felt the need last week to remind everyone that they had the option to really take the banks by the scruff of the neck and make them separate their retail and investment operations.

As for the running sore of sovereign debt, we are mired in the quagmire of American party politics – a more depressing spectacle than seeing a Republican and Democrat discuss the debt problems is difficult to find – and the Never-Never Land of the euro.

A single currency covering the feckless Club Med countries and the hard-working and successful Germans and French wasn't going to work as they were warned by, of all people, John Major and Norman Lamont in the early 1990s. It's a nailed-on certainty now against the backdrop of an unprecedented movement of wealth from West to East going on. Yet the EU's ruling elite can't even discuss decoupling the good from the bad in the euro. A failure of banks and regulators has been followed by a massive failure of politicians around the globe.

So what can you and I do to protect ourselves? It's actually been the question posed in a fair few reader emails of late.

Well, the good news is that you aren't as helpless as those bankers back in 2008 bemoaning the lack of a rescue. Presuming the US won't default on its debt – yet – there are basic things you can do. Build up a savings cushion of between three and six months salary minimum. If you're willing to tie up money for longer and you're a taxpayer, look at the National Savings index-linked certificates.

Examine your outgoings and your mortgage deal; fixed rates are very competitive again at the moment and good security against a worldwide rise in rates sparked by the sovereign debt crisis. In fact, these are many of the things you should have been doing in 2008.

Delusional house sellers are pricing themselves out of the market

FindaProperty.com says that the asking prices of properties that came on to the market in June were 8.9 per cent more expensive than those already for sale. According to the website, this shows "increasing optimism among home sellers".

That may be a nice way of saying delusional aspirations of homeowners. They maybe asking for 8.9 per cent over and above everyone else but they won't be getting it.

Another highlight in the Findaproperty release is that five-bedroom homes are selling at their fastest rate since 2008. That is just a tiny fraction of the market. The truth is, as we highlight on pages 98 and 99, little is shifting, apart from properties in the South-east or those that were seriously reduced in price. Yet it seems now instructions are going on from people with overinflated views of what their property is worth.

In many respects, years of low interest rates and a moratorium from lenders on repossessions has created a distorted property market. There are limited numbers of buyers – mainly people who made money and either want to upgrade (hence the five-bedroom sales figures) or get into buy to let, which as an investment makes more sense now than it has done in more than a decade.

Housing as an asset has become ever more illiquid. You have paid a certain price for it or borrowed a set sum against it, but who knows how much it really is worth now? Perhaps the best way to asses this is its rental value.

'Blue-sky' idea is a dark cloud

Here are my good-week bad-week nominees. Bad week for David Cameron's very own nutty professor Steve Hilton, who wants to see consumer rights abolished to boost economic output. In a world dominated by big corporations – half of which I'm sure would merrily sell arsenic as a baby food if they could get a way with it – the man or woman in the street has few ways to fight back, apart from a rather outdated patchwork of consumer rights legislation. Without these rights, though, companies would run roughshod; it would be a cheat's charter and no doubt cost lives as corners were cut and shoddy product belched out by industry.

On the good-week side, I'm going to say James Purnell. The former Labour work and pensions secretary Purnell wasn't much of a minister, to be frank. With his serious intelligence he wasn't really cut out for the world of red boxes and civil service shenanigans. He redeemed himself in many people's eyes by resigning over the terrible prime ministership of Gordon Brown. Not part of a wider plot it was a matter of principle. Now free of office and Parliament, Mr Purnell has done some real blue-sky thinking – rather than the intellectual diarrhoea of Mr Hilton – over welfare.

I'm not sure I quite share his ambition that Britons should "fall in love with welfare again", but his basic premise that ordinary folk don't see any benefit to them in the welfare state is sound. If they lose their jobs or retire, they get the same state handouts as someone who has never worked or even properly looked for it.

Instead, Mr Purnell would like to see a new state protection guaranteeing people who are made redundant a minimum income of £200 for six months. He'd also like to see a guarantee childcare promise for working mothers. To pay for this he would get rid of some of the smaller ad hoc benefits and abolish top-rate tax relief on pension, which only benefits the rich.

Not all Mr Purnell's numbers stack up, but the premise and focus are sound. If the coalition thinks about it clearly it can be made to fit in with its overarching idea of making work actually pay for people.

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